Pakistan’s financial situation has been a subject of concern for quite some time, and the latest revelations about the country’s international debt burden have only added to the worry. According to a recent briefing by the State Bank and the Ministry of Finance to the Senate Standing Committee on Economic Affairs, Pakistan has paid a staggering $5.66 billion in interest on international Euro and Sukuk bonds over the past 19 years. Additionally, the country has repaid the principal sum of $7.50 billion during this period.
The current outstanding debt stands at $6.8 billion, which is due to be settled by June 2024. This is a significant amount, and the government’s ability to pay it back is uncertain. The last international bond issued by Pakistan was in January 2022, with interest rates ranging from 5.75% to 8.75%. These high interest rates have added to the country’s debt burden, making it even more challenging to manage.
The officials also mentioned that the US Federal Reserve might reduce interest rates soon, with a similar trend observed in European, British, and Canadian markets. This could potentially lead to a reduction in Pakistan’s policy rate. However, the Ministry of Finance has clarified that no new bonds will be issued until global interest rates decline further.
This situation raises several concerns about Pakistan’s financial management and its ability to handle its debt burden. The country’s reliance on international bonds to finance its budget deficit has led to a vicious cycle of debt, where the government is forced to take on more debt to pay off existing loans. This has serious implications for the country’s economic stability and sovereignty.
The government needs to take immediate action to address this situation. This includes implementing fiscal discipline, reducing unnecessary expenditures, and increasing revenue through meaningful tax reforms. Additionally, the government should explore alternative financing options, such as foreign direct investment, to reduce its reliance on international bonds.
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